Next Wave of CO-LIVING: Hope, Hype or Something in Between?

In an interaction with Homes India Magazine, Sunil Pareek, Executive Director & CIO at Assetz, shares his valuable insights on the next wave of co-living in India and how it is reshaping urban housing with flexible and community-driven spaces for millennials.

Sunil Pareek is the Executive Director and Chief Investment Officer (CIO) at Assetz Property Group, a leading real estate developer in Bengaluru. With over 20 years of experience in real estate and infrastructure, he has been instrumental in expanding Assetz’s presence through strategic land acquisitions and design-led developments.

The Initial Wave – Promise and Pitfalls

As a formal, organized space, co-living in India first gathered momentum around 2015/16. The concept was marketed as a win-win for all: for millennials, a lifestyle upgrade with community, convenience, and flexibility; for operators, building a brand and scalable assets with annuity-like cash flows; for investors, a chance to participate in India’s demographic dividend. Some investors supported the pitch and invested in the sector.

Many consumers also lapped up the concept. But reality proved little harsher for investors, and many of the customers had less than expected experiences. Co-living operators struggled with high fit‑out costs, regulatory ambiguity, high churn, low margins, operational challenges to maintain service levels, and high common corporate overheads. Then COVID‑19 struck, impacting occupancies overnight. Many early players pivoted, scaled down, closed, or were forced into consolidation.

Is there a new wave of Co-living underway?

Why are people talking about co‑living again? The short answer: demand never went away. India’s urban housing gap remains vast, and the structural drivers are still in place. Colliers presented an interesting report on the organized co-living market during May 2025, which set out a canvas of emergence and a vast opportunity. As per the estimates, the organized co-living market – pegged around Rs. 4,000 crore in 2025 – could grow nearly fivefold to Rs. 20,000 crore by 2030. The demand for beds is also suggested to be enormous: around 6.6 million beds in 2025, projected to reach over 9 million by 2030. This is fueled by urban migration into cities (over 300 million people are expected to move to urban India by 2036), rising affordability pressures, and the return of younger professionals to offices.

Also Read: Rise of Coliving - Neighborhood Lifestyle in an Isolated World

The way I look at the co-living demand pyramid, nearly 60–70 percent of today’s co-living demand is price-sensitive, clustered in the affordable range (less than Rs. 10,000 per bed). This segment is dominated by students, fresh graduates, and early-career migrants who value affordability and basic convenience. The mid-market layer, about 25–30 percent of demand, sits in the Rs. 10,000–25,000 per bed range, targeting young working professionals who are willing to pay a premium for better design, amenities, and tech-enabled services.

Finally, the top of the pyramid — 5–10 percent of demand — lies in the premium bracket (above Rs. 25,000 per bed), catering to expats, mid-senior executives, and corporates leasing blocks of units. While small in volume, this layer sets benchmarks in service and brand positioning. Over time, as incomes rise and the segment matures, more demand is expected to shift upward into the mid- and premium layers, expanding the pool of renters who see value in co-living beyond just price.

The approach now appears more sober and strategic. Demand has never been the problem; operations and execution models catering to demand segments were. Today, operators and investors claim to have learned from early mistakes. We’re seeing a reset with an emphasis on sustainable growth in co-living rather than scaling at all costs. Notably, some corporate interest is there in all major cities like Pune, Bengaluru, MMR co-living, etc Some larger corporates are allocating capital, hiring real estate and hospitality talent, creating brands, developing standardized design and legal document templates, and setting 2–5 year expansion plans instead of a “let’s take it as it comes” approach.

Customized Design and the Customer Lens

The second wave is markedly different from the early PG-like models. Operators are no longer pitching glorified/painted hostels in rented buildings. Instead, they’re increasingly designing spaces from the ground up – compact, efficient, amenitized, and tech‑enabled co-living spaces. Custom-built is the buzzword: rather than retrofitting normal apartments, new projects are planned to be purpose-built for co-living, with optimized layouts, shared amenities, and operational efficiencies built in. Instead of 3 bedrooms in a 2000 sft classic apartment unit, there can be 6+ beds in the same space, thereby making a business case.

From a customer’s lens, the value proposition is clear. The friendly “uncle next door” might rent out his spare flat for a bit less, but he can’t offer a young renter the bundle of conveniences a co-living apartment provides. Unlike unorganized PGs, co-living spaces come with all-inclusive rent (covering Wi‑Fi, electricity, housekeeping, security), app-based service requests, curated community events, and often perks like gyms or gaming zones. Some of the co-living spaces match up to Gen-Z requirements like ice baths, a gourmet café, and new-age sports access, too.

Unit Economics and Yields

During the initial wave, many startups chased growth at all costs, subsidizing rents and offering “premium services at budget rates.” Occupancies were high, but losses piled up – a clearly unsustainable model. Now the conversation has shifted to unit economics in coliving and profitability. Today’s co-living operators talk about sustainability over scale. Instead of adding beds indiscriminately, they focus on driving a higher margin per bed and optimizing costs. Consolidation and discipline words have a conscious presence.

For investors, the yield story is a key part of the new math. Co-living assets, when run well, can generate rental yields in India in the mid to high single digits (around 5–8 percent), which is often more than double the 2-3 percent yield typical for a standard residential lease. In fact, institutional investors see co-living as increasingly attractive, with returns approaching 8 percent, versus just 2–4 percent for traditional residential assets due to sft size per bed optimization and value-added services. The formula works if operators keep acquisition and furnishing costs under control, while maintaining high occupancies. The flip side: if occupancies dip or costs escalate, the yield advantage vanishes quickly.

Execution Models and Collaborations

Global parallels also offer a useful perspective. In the UK, operators like The Collective showed how large-scale, branded co-living could blend hospitality and housing, while in the US, WeLive experimented with short-stay, community-driven apartments. In Asia, markets like Singapore and China have seen corporates and developers team up to deliver standardized, purpose-built co-living projects. While business models and outcomes have varied, the common thread is that co-living works best when it moves beyond being an improvised PG replacement and matures into a branded, well-governed asset class.

To address the capital-intensive nature of this business, many in the industry are adopting property ownership and operations execution as separate structures and partnerships. In this model, a real estate holding company owns the real estate, while an operations company leases and manages the running aspect of the co-living business. This separation allows each party to play to its strengths – developers/landowners handle construction and investment, and specialist operators’ team handle tenant experience, community, and daily operations. Over time, this may evolve into REIT‑able co-living assets with institutional capital backing stabilized portfolios.

For developers, this is a way to monetize land or unsold inventory without an outright sale, creating a new co-living real estate asset class that can someday yield like commercial realty but taps residential demand. In one case, as per a recent news article, a township developer carved out a tower for co‑living, achieving nearly double the rental income compared to conventional residential leasing.

Over the next 2–5 years, we will see this story play out. If the current trajectory holds, co-living could become an established asset class, complete with its own brands.

The Other Side of the Story

It would be naïve to claim that the co-living model is cracked and established now. Several headwinds and risks remain on the horizon:

- Regulatory ambiguity and fragmentation: Housing rental laws in India are largely state subjects, and most states still have rent control acts or lodging house regulations that don’t neatly cover co-living. The national rental housing policy is still not evenly adopted by states. Navigating fragmented municipal approvals – from fire safety to health licenses – can be a nightmare for operators expanding to new cities or states. Progress is happening, but state-level adoption is slow.

- GST as a headwind: Taxation too remains a grey area. While a typical landlord’s rent is GST-exempt, co-living operators bundle services like housekeeping, Wi-Fi, and security, which may attract GST on how the rentals are structured. This can create a cost gap versus traditional rentals, particularly at the affordable end, and puts additional pressure on unit economics.

- Supply constraints: Quality, large-scale buildings that can be used for co-living are scarce. Building new ones takes time and significant capital. Land in prime areas is expensive, and developers need to be convinced of the model’s payoff in prime areas, and operators need to be convinced of demand drivers if on the outskirts.

- Operational intensity and service quality: Co-living is closer to hospitality than traditional real estate. Early entrants underestimated this and had a mix of average to poor customer experiences. Next-wave operators must prove they can consistently deliver on the service promise.

- Financial discipline and funding environment: The funding climate has shifted. Valuations are more conservative, forcing startups to focus on profitable models. Deal structures now favor revenue-share arrangements or management contracts instead of risky fixed leases. The larger institutional capital is still not present in this space, and a few such transactions can instill more confidence in the space.

Next what?

Where does this leave us? Probably somewhere in between hype and hope. Co‑living is not a silver bullet for India’s housing challenges, but it doesn’t seem like a fad either. The next wave, despite the challenges listed above, looks more sober, sustainable, and scalable co-living integrated with the broader residential ecosystem than the first. Big real estate firms are getting involved, start-ups are focusing on profitability, and the product is evolving in a way that genuinely addresses a market need.

Over the next 2–5 years, we will see this story play out. If the current trajectory holds, co-living could become an established asset class, complete with its own brands. Cities like Bengaluru, Pune, Hyderabad, and Delhi NCR are likely to be the testing grounds where co-living matures into its definitive form.

Only time will tell how far this wave goes!